Overbooking flights: Shouldn't the ones who cancel pay the price?

I was watching the news last night when I saw a story on airline passenger rights and compensation when airlines overbook flights and then have to bump you off your flight.
This is one of those blogs that will not be very long. The point I want to make is so obvious to me that I don't need to make many high concept arguments to back it up. It boils down to two things.
Fairness and customer service.

 http://ca.news.yahoo.com/video/airline-passenger-rights-032800922.html
 
The crux of the story is that Air Canada, the major airline in Canada, is being told that if they bump passengers it has to pay a heavier price than it currently does. As with most government actions, while it is a step in the right direction, it completely misses the point.

http://www.cbc.ca/news/canada/story/2013/05/28/f-air-canada-passengers-overbooked-flights.html 

Shouldn't those that book a flight and then cancel have to pay the bulk of the difference so that airlines are not forced to inconvenience those that pay up front and reserve their spot? That only seems logical to me. To be bumped off when you have a reservation is not a true reservation.

I don't understand. I made a reservation. Do you have my reservation?

Yes, we do. Unfortunately, we ran out of cars.

But the reservation keeps the car here. That's why you have the reservations.

I know why we have reservations.

I don't think you do. If you did, I'd have a car.
See, you know how to take the reservation, you just don't know how to hold the reservation. And that's really the most important part of the reservation. The holding. Anybody can just take em.

Why does this continue to go on? In Canada, mostly because the airlines have a monopoly and don't have to be competitive. We have two significant, major airlines. Air Canada, which uses this overbooking strategy to ensure full flights, and WestJet, the newer kid on the block, which does not. If Air Canada had to be more competitive and care about customer service, then they simply would not employ this strategy. The government lets them get away with this. Changing the penalty, while a start, is not enough. For this reason, I rarely fly anymore, and certainly make every attempt to avoid Air Canada. I am willing to pay a bit more if need be, but like Jerry Seinfeld, when I make a reservation, and then I show up, I expect that to be honored. Period. That is the way it should be. 
I don't want greater compensation for being taken advantage of. I have money. I am not looking for money. I am looking for services rendered for money paid. Simple as that. In my view, overbooking should be illegal and the government should make that a law.
If airlines wanted to hedge their bets, then they should change the cancellation option to a graded penalty, depending on how close to the flight you cancel. In other words, if you cancel a month early, maybe 3%, two weeks early, then maybe 20%, two days before, 50% and the day of, no refund. For those who want to hedge their own bets, they can buy insurance to protect themselves, much like the cruise ships offer you when you book your trips with them. As the customer who books early, pays up front and then shows up and wants what I paid for, when I paid for it, why should I have to suffer for others who don't, and companies who don't respect and appreciate me as a very good customer? 
I shouldn't.
Once a flight is booked, then it is booked. Overbooking is not even a concept that should be considered. And if enough cancel and pay the penalty, then they can resell the spot and double dip on those seats. At the end of the day, they will come out even. And right now, they aren't going to, because people are getting fed up and will find another way around dealing with those who don't honor their obligations and promises.
Like me. I would rather drive. My car, sitting in the driveway is never overbooked when I go out to start my trip. And I don't have to pay airport fees either. Keep giving me reasons to not fly and I will keep taking them.